Correlation Between CVW CleanTech and Summit Materials

Can any of the company-specific risk be diversified away by investing in both CVW CleanTech and Summit Materials at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CVW CleanTech and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVW CleanTech and Summit Materials, you can compare the effects of market volatilities on CVW CleanTech and Summit Materials and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CVW CleanTech with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CleanTech and Summit Materials.

Diversification Opportunities for CVW CleanTech and Summit Materials

0.14

Correlation Coefficient

CVW CleanTech  Summit Materials

Average diversification

The 3 months correlation between CVW and Summit is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and CVW CleanTech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CVW CleanTech are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Summit Materials go up and down completely randomly.

Pair Corralation between CVW CleanTech and Summit Materials

Assuming the 90 days horizon CVW CleanTech is expected to generate 14.54 times more return on investment than Summit Materials. However, CVW CleanTech is 14.54 times more volatile than Summit Materials. It trades about 0.05 of its potential returns per unit of risk. Summit Materials is currently generating about 0.32 per unit of risk. If you would invest  57.00  in CVW CleanTech on December 27, 2024 and sell it today you would earn a total of  4.00  from holding CVW CleanTech or generate 7.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

CVW CleanTech  vs.  Summit Materials

CVW CleanTech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CVW CleanTech reported solid returns over the last few months and may actually be approaching a breakup point.

Summit Materials

Risk-Adjusted Performance

Solid

Over the last 90 days Summit Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Summit Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CVW CleanTech and Summit Materials

The main advantage of trading using opposite CVW CleanTech and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CleanTech position performs unexpectedly, Summit Materials can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Summit Materials will offset losses from the drop in Summit Materials' long position.

The idea behind CVW CleanTech and Summit Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.